FEDERAL COURT OF AUSTRALIA

Norcast S.ár.L v Bradken Limited (No 3) [2013] FCA 283

THE COURT DECLARES THAT:

Cartel conduct

1.    By entering into a bid rigging arrangement by no later than 8 March 2011, whereby Castle Harlan, Inc (Castle Harlan) agreed to bid for Norcast Wear Solutions, Inc (NWS) and the First Respondent (Bradken) agreed not to bid for NWS (Bid Rigging Arrangement), Bradken contravened s 44ZZRJ of the Competition and Consumer Act 2010 (Cth) (the CCA).

2.    By giving effect to the Bid Rigging Arrangement during the period from 8 March to 6 July 2011, Bradken contravened s 44ZZRK of the CCA.

3.    By making or arriving at the Bid Rigging Arrangement, Castle Harlan contravened s 44ZZRJ of the CCA.

4.    By giving effect to the Bid Rigging Arrangement during the period from 8 March to 6 July 2011, Castle Harlan contravened s 44ZZRK of the CCA.

5.    Bradken was a person involved, within the meaning of s 75B of the CCA, in the contraventions by Castle Harlan referred to in paragraphs 3 and 4 above (Castle Harlan cartel contraventions).

6.    The Second Respondent (Greiner) and the Third Respondent (Hodges) were persons involved, within the meaning of s 75B of the CCA, in the contraventions by Bradken referred to in paragraphs 1 and 2 above and the Castle Harlan cartel contraventions.

Misleading or deceptive conduct

7.    Bradken has, during the period from late February 2011 to 6 July 2011, in trade or commerce, engaged in conduct that was misleading or deceptive, or likely to mislead or deceive, in contravention of s 18 of Sch 2 to the CCA (ACL) by its silence about the Bid Rigging Arrangement and about the fact that Bradken and Castle Harlan were cooperating for the purpose of acquiring NWS and had a back to back sale arrangement.

8.    Castle Harlan has, in trade or commerce, engaged in conduct that was misleading or deceptive, or likely to mislead or deceive, in contravention of s 18 of the ACL by:

8.1    its silence during the period from late February 2011 to 6 July 2011 about the Bid Rigging Arrangement and about the fact that Bradken and Castle Harlan were cooperating for the purpose of acquiring NWS and had a back to back sale arrangement;

8.2    representing, on 12 or 13 May 2011, to the Applicant that Castle Harlan:

8.2.1    did not have plans to sell NWS to Bradken, when that was not the case; and

8.2.2    would not sell NWS to Bradken, without reasonable grounds and when that was not the case,

8.3    representing, on 27 May 2011, to the Applicant that:

8.3.1    the bid for NWS was made on behalf of Castle Harlan and its associated entities, when that was not the case;

8.3.2    Castle Harlan intended that the entity to acquire the shares in NWS would be a corporation controlled in the sole investment discretion of Castle Harlan’s associated entities, when that was not the case;

8.3.3    the entity to acquire the shares in NWS would be a corporation controlled in the sole investment discretion of Castle Harlan’s associated entities, without reasonable grounds;

8.3.4    Castle Harlan and its associated entities did not expect to require, or intend to obtain, any funding for the acquisition of the shares in NWS from nonassociated entities of Castle Harlan, when that was not the case; and

8.3.5    Castle Harlan and its associated entities would not require, and would not obtain, any funding for the acquisition of the shares in NWS from nonassociated entities of Castle Harlan, without reasonable grounds.

9.    Bradken was a person involved, within the meaning of s 2(1) of the ACL, in the contraventions by Castle Harlan referred to in paragraph 8 above (Castle Harlan misleading or deceptive conduct contraventions).

10.    Greiner and Hodges were persons involved, within the meaning of s 2(1) of the ACL, in the contravention by Bradken referred to in paragraph 7 above and the Castle Harlan misleading or deceptive conduct contraventions.

AND THE COURT ORDERS THAT:

11.    The Respondents pay to the Applicant:

11.1    damages under s 82 of the CCA and/or s 236 of the ACL in the amount of US$22,400,000 (or the AU$ equivalent at the time of payment or execution);

11.2    pre-judgment interest in the amount of US$2,940,690.41 (or the AU$ equivalent at the time of payment or execution) calculated from 6 July 2011 to 28 March 2013 in accordance with s 51A of the Federal Court of Australia Act 1976 (Cth) (the FCA); and

11.3    post judgment interest on US$22,400,000 (or the AU$ equivalent at the time of payment or execution) calculated from 28 March 2013 in accordance with s 52 of the FCA at the rate or rates applicable pursuant to r 39.06 of the Federal Court Rules 2011 (Cth) (the Rules) from time to time.

12.    The Respondents pay the Applicant’s costs of and incidental to this proceeding, including the costs of and incidental to proceeding VID 978 of 2011, in accordance with r 25.14(3) of the Rules:

12.1    on a party and party basis to 11:00 am on 15 May 2012; and

12.2    on an indemnity basis from that time onwards.

13.    There be a stay of execution of paragraphs 11 and 12 above until the later of:

13.1    seven days from the date on which the time permitted for the Respondents to appeal from these orders has expired without an appeal being commenced; or

13.2    seven days from the date that final orders were made in any appeal from these orders, but on condition that the Respondents deposit, on or before 30 April 2013, US$25,340,690.41 (or the AU$ equivalent at the time of payment) into an interest bearing account set up and controlled by the Federal Court of Australia pursuant to Div 2.5 of the Rules.

14.    The security provided by the Applicant for the Respondents’ costs of this proceeding in the amount of $227,500, held by the Applicant’s solicitors pursuant to an Escrow Agreement dated 25 July 2012 between the Applicant and the Respondents, remain in escrow until the later of:

14.1    seven days from the date on which the time permitted for the Respondents to appeal from these orders has expired without an appeal being commenced; or

14.2    seven days from the date that final orders are made in any appeal from these orders.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011 (Cth).

REASONS FOR JUDGMENT

1    On 19 March 2013, the Court published its Reasons for judgment (the Reasons): Norcast S.ár.L. v Bradken Limited (No 2) [2013] FCA 235. These reasons for judgment adopt the same terms and abbreviations as the Reasons.

2    The parties were directed, if they were unable to reach agreement on orders to give effect to the Reasons, to file and serve a copy of the orders sought supported by written submissions. The parties were unable to reach agreement on orders to give effect to the Reasons. On 26 March 2013, the parties filed minutes of proposed orders and written submissions.

3    Five issues arise for determination:

1.    whether declarations of contraventions of the CCA and the ACL ought to be made and, if so, the appropriate form of those declarations;

2.    whether there should be an order for pre-judgment interest;

3.    whether there should be a stay of execution upon the orders;

4.    the appropriate order for costs; and

5.    whether funds placed in escrow as security for the Respondents’ costs should remain in escrow pending a proposed appeal.

I will deal with each issue in turn.

DECLARATORY RELIEF

4    Norcast sought a number of declarations. The Respondents submitted that the declarations were unnecessary. It is appropriate that the Court grant declaratory relief in this case. The Court has the power to grant declaratory relief in the form sought (s 21 of the Federal Court of Australia Act 1976 (Cth) (the FCA)) and the usual threshold requirements for declaratory relief have been satisfied. Namely, the issues in respect of which the relief is sought are not abstract or hypothetical, the party seeking declaratory relief has a real interest to raise it and there is a proper contradictor: see, eg, Aussie Airlines Pty Ltd v Australian Airlines Ltd (1996) 68 FCR 406 at 414. The fact that Norcast did not originally seek declaratory relief is not dispositive: see, eg, Farrow Finance Company Ltd (in liq) v Farrow Properties Pty Ltd (in liq) [1999] 1 VR 584 at [178]. The ultimate form of the declarations, however, has been amended to reflect more precisely the findings made in the Reasons.

5    Alternatively, the Respondents submitted that four of the declarations sought by Norcast were unnecessary, namely:

1.    that Castle Harlan carried on business in Australia;

2.    that the representations referred to in [8.2.2], [8.3.3] and [8.3.5] of the orders above were representations as to future matters;

3.    that because of the conduct of Bradken, Hodges and Greiner in contravention of the provisions of Pt IV of the CCA, Norcast suffered loss and damage in the amount of US$22.4 million; and

4.    that Norcast made an offer of compromise and obtained a judgment on more favourable terms.

I accept the Respondents’ alternative submission.

6    Finally, the Respondents submitted that the declaratory relief sought in respect of Bradken’s and Castle Harlan’s silence should refer only to the Bid Rigging Arrangement, and not the fact that Bradken and Castle Harlan were cooperating for the purpose of acquiring NWS and had a back to back sale arrangement. The Respondents’ third submission is rejected.

7    That submission ignores the findings made in the Reasons: see Reasons [306], [315] and [320]. The misleading or deceptive conduct by silence was not only a misrepresentation as to the Bid Rigging Arrangement but also in relation to Bradken and Castle Harlan’s cooperation for the purpose of acquiring NWS and the existence of a back to back sale arrangement. Those findings are important. The conclusion in relation to misleading or deceptive conduct does not depend upon the existence of the Bid Rigging Arrangement, although, having concluded that there was a Bid Rigging Arrangement, that arrangement was one element of it. Accordingly, the declaratory relief has been crafted to reflect all of the elements of the misleading or deceptive conduct.

PRE-JUDGMENT INTEREST

8    Section 51 of the FCA, provides that:

(1)    In any proceedings for the recovery of any money (including any debt or damages or the value of any goods) in respect of a cause of action that arises after the commencement of this section, the Court or a Judge shall, upon application, unless good cause is shown to the contrary, either:

(a)    order that there be included in the sum for which judgment is given interest at such rate as the Court or the Judge, as the case may be, thinks fit on the whole or any part of the money for the whole or any part of the period between the date when the cause of action arose and the date as of which judgment is entered; or

(b)    without proceeding to calculate interest in accordance with paragraph (a), order that there be included in the sum for which judgment is given a lump sum in lieu of any such interest.

9    The Respondents accepted that an order for pre-judgment interest was appropriate. The orders reflect that fact.

STAY OF EXECUTION

10    The Respondents sought a stay of execution of the final orders pursuant to s 29 of the FCA and / or r 36.08(2) of the Federal Court Rules 2011 (Cth) (the Rules) until the later of:

1.    seven days from the date on which the time permitted for the Respondents to appeal from the judgment has expired without an appeal being commenced; or

2.    seven days from the date that final orders were made in any appeal in these proceedings but on condition that the Respondents provided, on or before 30 April 2013, to the solicitors for Norcast, security for the total amount of the sum payable in accordance with orders 1, 2 and 3 and any interest thereon, by way of a bank guarantee in favour of Norcast.

11    Norcast opposed the application for an order staying the execution of the judgment pending appeal. Alternatively, Norcast submitted that if an order were to be made staying the execution of the judgment, then such order should be made subject to a condition that the Respondents pay into the Litigants’ Fund the full amount of the judgment sum and that any interest earned on the money follow the event.

12    The relevant principles are well established. The prima facie assumption must be that the judgment appealed from is correct and that the Court should not deprive a litigant of the benefit of a judgment in its favour: Powerflex Services Pty Ltd v Data Access Corporation (1996) 67 FCR 65 at 66. The question which then arises is whether the balance of convenience favours the grant of a stay? Unsurprisingly, the Respondents submitted that the answer to that question was yes for reasons that included that:

1.    Norcast is a limited company incorporated in, and which has its principal place of business in, Luxembourg;

2.    Luxembourg is a foreign jurisdiction with which Australia has no treaty or reciprocal arrangement in relation to the recognition or enforcement of judgments in civil matters;

3.    Norcast is a subsidiary of Pala, and neither Norcast nor Pala has any current assets or business presence in Australia;

4.    Norcast has previously provided security for the Respondents’ costs of this proceeding;

5.    in light of the matters referred to above, if no stay is granted and the appeal succeeds, there is a risk that the Respondents will be unable to recover the judgment sum from Norcast and the appeal will be rendered nugatory;

6.    on the other hand, if a stay is granted and the appeal fails, interest will accrue on the judgment sum, and Norcast will be protected by the bank guarantee which it is proposed will be required to be provided;

7.    there are arguable grounds of appeal including in relation to the proper construction and application of the complex facts of the cartel conduct provisions which have not previously been considered by the courts; and

8.    the disputed factual and legal issues were complex.

13    In all the circumstances, the balance of convenience favours the grant of a stay but not on the conditions offered by the Respondents. If the Respondents appeal, the appropriate condition for the grant of a stay is that that the Respondents pay into the Litigants’ Fund the full amount of the judgment sum and that any interest earned on the money follow the event. The provision of a bank guarantee does not fully protect Norcast’s position in relation to interest. There will be a direction that the judgment sum (including pre-judgment interest) be paid into an interest bearing account established by the Federal Court of Australia in accordance with Div 2.5 of the Rules.

COSTS

14    On 11 May 2013, Norcast made an offer to the Respondents to compromise the proceeding on terms more favourable to the Respondents than the judgment obtained from the Court.

15    In accordance with r 25.14(3) of the Rules, Norcast sought an order that the Respondents pay Norcast’s costs of and incidental to the proceeding and an earlier preliminary discovery application (VID 978 of 2011) on the following basis:

1.    before 11:00am on 15 May 2012, on a party and party basis; and

2.    from that time onwards, on an indemnity basis.

Norcast is entitled to such an order.

FUNDS IN ESCROW

16    On 25 July 2012, Norcast and the Respondents executed what is described as an “Escrow Agreement” (the Agreement). Its terms are far from clear. Under the Agreement, security for the Respondents’ costs of the proceeding was to be held in escrow until released in accordance with the Agreement.

17    The Agreement contained the following definitions:

1.1    Definitions

The following definitions apply unless the context requires otherwise.

Escrow Conditions means presentation of:

(a)    a joint unconditional written demand from the Respondents; and

(b)    an original sealed order of the Federal Court of Australia in the Proceeding or, in the event of an appeal therefrom, the appeal (Appeal), pursuant to which Norcast is required to pay the costs of any one or more Respondents; and

(c)    where the order referred to in (b) does not itself fix the amount of costs payable to the Respondent(s), either a sealed copy of a certificate of taxation issued by the Federal Court of Australia, or a certified copy of the written agreement between Norcast and the Respondents of an amount of costs to be paid by Norcast to the Respondent(s) in respect of the Proceeding or Appeal (Costs Agreement).

(Emphasis in original.)

“Proceeding” was defined to mean this proceeding.

18    The Agreement further provided:

3.    Escrow

3.1    Execution and deposit

Norcast will deposit $227,500 with the Escrow Agent to be held in escrow until released in accordance with clause 4 (Escrow Money). The Escrow Money will be held in a non-interest bearing trust account.

4.    Release of Escrow Money

4.1    Release from Escrow

Immediately following satisfaction of the Escrow Conditions:

(a)    despite any notice given by Norcast not to pay any moneys to the Respondents; and

(b)    with no obligation to enquire as to the performance or non-performance of the Costs Agreement in any respect by Norcast or Respondents;

the Escrow Agent must release from escrow the sum demanded by the Respondents. All payments made under this Agreement shall be deducted from the Escrow Money held by the Escrow Agent.

5.    Termination

If the Escrow Money has not been released before midnight on the Expiry Date, then the Escrow Money will be returned to Norcast.

(Emphasis in original.)

19    Pursuant to cl 5, the Agreement expired on what was referred to as the “Expiry Date”. The Expiry Date was defined to mean:

(a)    the date of any order made by the Federal Court of Australia in the Proceeding or Appeal pursuant to which the Respondents are required to pay all of their own legal costs of the Proceeding; or

(b)    the date that any time for appeal from a decision in the Proceeding, or further appeal from the Appeal, by the Respondents has expired without the appeal being commenced.

20    The Respondents sought an order that the Escrow Money remain in escrow for a similar time, for the same reasons and on the same conditions as the proposed stay of execution referred to at [10] above. The Respondents submitted that the Escrow Money was required to remain in escrow until the conclusion of any appeal on the proper construction of the definition of Expiry Date and cl 5 of the Agreement. Further, and in the alternative, the Respondents submitted that Escrow Money should remain in escrow pending the outcome of any appeal for the reasons referred to at [12] above.

21    As to the first submission, the question is whether the Expiry Date occurs on the making of the orders the subject of these reasons or, alternatively, does not occur until the making of relevant orders in an appeal. The definition of Expiry Date does not explain the relationship between the various events which might constitute the occurrence of an Expiry Date. For instance, taking sub-cl (a), it would seem that the making of these orders would constitute the occurrence of an Expiry Date, because of the words “the date of any order made by the Federal Court of Australia in the Proceeding … pursuant to which the Respondents are required to pay all of their own legal costs of the Proceeding”. It is ambiguous as to whether the insertion of the words “or Appeal” means that the Expiry Date does not occur where there is an order requiring the Respondents to pay their own legal costs of the Proceeding but there is an Appeal or the prospect of an Appeal. In order to give meaning to those words, and consistent with the definition of “Escrow Conditions” which refers to “the event of an appeal” (and defines an appeal from the Proceeding as an “Appeal”), it is necessary to construe the definition of Expiry Date such that the Expiry Date does not occur where an order requiring the Respondents to pay their own legal costs is made but there remains the possibility of an appeal.

22    As to the second submission, the Respondents’ position was that, should an appeal be successful, Norcast would likely be ordered to pay the Respondents’ costs of the first instance proceeding. The Respondents’ submission was that, in effect, the balance of convenience favoured a stay of Norcast’s ability to recover the Escrow Money. In light of the conclusion reached above, it is unnecessary to consider the Respondents’ second submission.

23    There will be a direction that the Escrow Money be retained in escrow until either:

1.    seven days from the date on which the time permitted for the Respondents to appeal from these orders has expired without an appeal being commenced; or

2.    seven days from the date that final orders are made in any appeal from these orders.

It is unnecessary to direct what should be done with the Escrow Money after the expiration or either time period. The Agreement dictates what should occur.

Associate:

Dated:    28 March 2013